Government to give regulator an extra £5m a year of 'interim funding'

The move comes as the Charity Commission draws up a consultation on long-mooted plans to raise an additional £7.5m a year from the largest 2,000 charities

Charity Commission building

The government will give the Charity Commission an extra £5m a year in interim funding while the regulator considers "more sustainable funding models".

A statement from the commission, which had previously had its annual funding from government frozen at £20.3m until 2020, said the government had awarded the regulator the additional funds to help it deal with "significant increases in demand on its core regulatory functions, including registration and compliance".

The commission has been lobbying for additional funds to deal with cuts to its settlement from central government that have resulted in its funding falling by about a half in real terms since 2010, according to the regulator.

It is not clear for how long the commission will be given the extra funds.

In the same statement, the regulator said it planned to hold a consultation "later in the year" on plans to charge the largest charities for its services.

The commission said the details were still to be firmed up, but it expected to consult on proposals to raise an additional £7.5m a year by introducing a charge for the largest 2,000 charities, or those with annual incomes of £5m or more.

This would mean all those charities paying an average contribution of £3,750 a year, although the commission has previously mooted the idea of a sliding scale of charges according to an organisation’s size.

The commission said it wanted to hear from charities of all sizes about how it might be able to expand the support it provides to charities, particularly smaller ones.

William Shawcross, chair of the Charity Commission, said the extra funding showed the government acknowledged the "unprecedented rise in demand" for the regulator’s services in recent years.

"The new money will help us continue to increase the effectiveness of our core regulatory functions in the short term, as we explore longer-term solutions," he said.

He said it was right that the regulator considered asking the charities "with the broadest shoulders" to make a contribution towards aspects of the commission’s work.

"We would plan to use these funds to increase and improve the services and support we offer, and want to encourage charities to step forward and feed-in their thoughts," he said.

Tracey Crouch MP, the Minister for Sport and Civil Society, said the interim funding for the regulator would mean it could "meet the increasing demands for its services and help charities continue to improve lives up and down the country".

She said: "It is important that the sector continues to innovate, and this includes the commission considering a range of funding models for the future."

Andrew O’Brien, director of policy and engagement at the Charity Finance Group, said the government had made a good decision in giving the regulator additional funds.

"However, this increase blows out of the water the argument that government cannot afford to pay for regulation," he said. "Government can fund the Charity Commission if it wants to."

He said charging charities for the Charity Commission meant "gambling with the reputation and financial sustainability" of the regulator: "So far we haven’t seen any good arguments offered on why we should take that risk."

Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, welcomed the additional funding, but said he remained against the idea of charities paying for the core functions of the regulator.

He said the announcement "suggests that the additional Treasury allocation is for the short term only, and the commission will in time look to charities to cover not only this same sum but also more".

He said: "Any public debate about future funding should start with absolute clarity on the scale and cost of the commission’s core regulatory work and of the additional activities it also wishes to undertake. Only then should we ask whether charities should make a contribution."

Vicky Browning, chief executive of the charity leaders body Acevo, said she welcomed the additional funds but was disappointed that the government had not committed to providing long-term investment in the regulator.

"We believe prevention and support services are core functions of good regulation and investment in such services is cost-effective in the long term," she said.

"We hope that the consultation process will include constructive and open discussion about the merits of both the principle and the detail of charging charities to fund the regulator’s work."